Besides its emotional cost, divorce can also take a toll on your finances. From legal costs to property division (especially if you have marital debt), there is no doubt that divorce can be an expensive undertaking.
With all the paperwork to go through and life adjustments to make, it is not uncommon for divorcing couples to make financial mistakes that can haunt them for years to come. Here are common financial pitfalls that you need to steer clear of while going through the divorce process.
Fighting to keep the family home
Chances are you love your home. You have made precious memories there, your friends live close by and you do not appreciate the disruption that comes with moving. These are genuine reasons why you might want to fight tooth and nail to keep the home during the divorce process. However, keeping the home also comes with its share of a financial burden. From property taxes to routine repairs and mortgage payments, a lot goes into owning a home. And it is never a great idea fighting to keep the home if you do not have the financial power to keep up with these obligations.
Overlooking your expenses
When you are married, it is likely you will share household bills. However, this ceases to be the case once the divorce is finalized and everyone goes their separate ways. It is important that you review your finances after the divorce to ensure that you are living within your means. While at it, be sure to project the cost of your future living expenses, keeping inflation and income in mind. This will help you avoid financial hardship in the future.
Overlooking the tax factor
While you were married, chances are you filed your taxes as “Married Filing Jointly.” Obviously, this ceases to be the case when you are divorced. Meaning, you are likely to forfeit certain benefits while filing your taxes after the divorce. Additionally, you will need to understand how alimony payments affect your taxes.
Divorce comes with serious financial implications. Find out how you can avoid costly financial mistakes while going through the divorce process.